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CPF Advis­ory Pan­el has just released their last 2 recom­mend­a­tions on the CPF enhance­ments.

New CPF Life option with escal­at­ing pay­out

In future, CPF mem­bers will have 3 options to choose for their CPF Life, which is an annu­ity scheme admin­istered by CPF board to give monthly pay­out to retir­ees from age 65 in his life­time. The first two options are CPF Life Stand­ard and CPF Life Basic with level pay­out through­out, with the pri­or giv­ing high­er monthly pay­out and less to the bene­fi­ciar­ies when mem­ber passes on and there is any money left; and lat­ter one giv­ing lower monthly pay­out and more to the bene­fi­ciar­ies when mem­ber passes on and there is any money left.

The new option is one with escal­at­ing pay­out set at 2% increase a year, but the ini­tial monthly pay­out will start at about 20% below in monthly pay­out com­pared to CPF Life Stand­ard plan, assum­ing same premi­um amount and pay­out age.

The new option is good for those who will get level pay­out from their private retire­ment plans, as the monthly pay­out will increase over the years from their CPF Life scheme. It is also good for those who may want to con­tin­ue work­ing bey­ond age 65 and thus have income and do not require high­er pay­out in the ini­tial years but more later when they can­not work at a more advanced age.

Life­time Retire­ment Invest­ment Scheme

Besides the cur­rent CPF Invest­ment Scheme in which CPF mem­bers can invest in the unit trusts offered by the private invest­ment firms and also the Invest­ment-linked plan offered by insurers, CPF mem­bers can now look for­ward to a sim­pler future Life­time Retire­ment Invest­ment Scheme (LRIS) that the gov­ern­ment will work on to offer to CPF mem­bers later.

LRIS will offer a small num­ber of well-diver­si­fied pass­ively man­aged funds, which are sim­pler for CPF mem­bers to choose from, and one which do not need act­ive rebal­an­cing, likely a mar­ket life-cycle invest­ment approach. CPF mem­ber can liquid­ate their LRIS any­time up to the age 70, the latest date that CPF Life pay­out can begin, so that they are not forced to do so at age 65 (CPF Pay­out Eli­gib­il­ity Age) dur­ing the mar­ket down­turn.

This new CPF Invest­ment option may be good for those who want to grow their CPFOA fund more for their retire­ment. I per­son­ally feel that the 4%-5% interest guar­an­teed in our CPF Spe­cial Account is best to be left there for diver­si­fic­a­tion and no risk with high interest.

CPF Advis­ory Pan­el that was set up in Septem­ber 2014 has just released the part 1 of their recom­mend­a­tion on CPF changes. These changes are likely to take place in 2016 as all fig­ures stated are in 2016 dol­lars.

CPF Retire­ment Sum
There will be 3 tiers of retire­ment sum that a CPF mem­ber can set aside. The first basic tier is called the Basic Retire­ment Sum, $80,500 in 2016. Mem­ber will expect to get $650 to $700 monthly pay­outs from age 65 onwards for life. How­ever, this tier only applies to house own­er who has pledged his prop­erty. There­fore, if the mem­ber sells his prop­erty, the amount of the pledge will be returned to his CPF to sup­ple­ment his basic pay­out, par­tic­u­larly if he now needs to pay rent on his accom­mod­a­tion.

CPF Mem­ber who does not own his home should set aside the Full Retire­ment Sum at two times the BRS, or $161,000 in 2016. This will trans­late to $1200 to $1300 monthly pay­outs from age 65 onwards.

For those who wish to get high­er pay­outs dur­ing their retire­ment, they can set aside Enhanced Retire­ment Sum of $241,500, which is three times the Basic Retire­ment Sum. The estim­ated monthly pay­out will be between $1750 and $1900. CPF mem­ber can do so by top­ping up his retire­ment account with his CPF sav­ings or cash.

From 2017, the Basic Retire­ment Sum will increase at 3% p.a. till 2020 to factor in infla­tion and high­er cost of liv­ing.

CPF Lump Sum With­draw­al

CPF mem­ber will now be allowed to with­draw 20% of their Retire­ment Account Sav­ings at the Pay­out Eli­gib­il­ity Age, pre­vi­ously known as Draw­down Age. This with­draw­al amount includes the $5000 they were eli­gible to with­draw from age 55.

Oth­ersCPF mem­ber can also delay the Pay­out Eli­gib­il­ity Age till 70, and to expect to get 6% to 7% more monthly pay­outs for each year deferred.

CPF mem­ber can also trans­fer amounts in excess of the Basic Retire­ment Sum of $80,500 to his fam­ily member’s Spe­cial Account or Retire­ment Account. This is espe­cially import­ant for a house­wife who has low CPF sav­ings and thus depend­ent on her hus­band CPF Life pay­outs, as women tend to out­live their hus­bands.

The CPF Advis­ory Pan­el will con­tin­ue its stud­ies on altern­at­ive private invest­ments and annu­it­ies and intro­duce a CPFLIFE plan with an escal­at­ing pay­out struc­ture. The recom­mend­a­tion is expec­ted to be ready by mid-2015.